And he called on politicians in Washington to make the right choices to sort out the economic crisis.

"I don't think there's any confusion in Washington that they need to make smart choices to help the US economy," he said.

We probably missed the power of the advertising model, not so much the technology

Steve BallmerMicrosoft chief executive

The Microsoft chief said that, while it was not clear how consumers would react to the economic crisis, "you've got to assume that people are going to assess their overall wealth differently so they aren't going to be spending as much on high-cost capital goods".

Advertising concern

On the failure to realise early enough the importance of internet search, Mr Ballmer said: "Do I wish we'd started the investment in search a few years earlier? Yes."

"We may be the David up against Goliath but we're working on it."

And he added that the real concern was the lead that Google had built up in online advertising.

"We probably missed the power of the advertising model, not so much the technology," Mr Ballmer said.

There was a promise that Microsoft would take the battle to Google in search - and beat off any challenge in the field of mobile phone software.

With their Windows PCs people have what I would call a love/hate relationship

Steve Ballmer

Last week saw the launch of the first phone based on Google's open-source Android platform.

But Mr Ballmer said an open-source solution would not be attractive to phone manufacturers, and predicted that Windows Mobile phones would stay ahead of Blackberry, Apple's iPhone and Google Android in the smartphone market.

"You've got to remember Android is version one....and it looks like version one," he said.

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